INSURANCE COVERAGE DENIED IN GEORGIA CASE

Tim Burke, Manley Burke, tburke@manleyburke.com

In April of 2003, members of the Lambda Chi Alpha Chapter at the University of Georgia took a potential pledge to several Athens, Georgia area bars to “entice him to become a member.”  One of the members, Travis Star, III, was below the legal age limit.  Nonetheless, he illegally consumed alcohol and became drunk.  Later that night, he stood up and fell out of the back of a moving pick-up truck being driven by a sober member of the Chapter.  Star subsequently died from the head injuries he received.

A lawsuit followed some two years later.  The Fraternity notified its insurance carrier, Liberty Corporate Capital, of the existence of the suit, but the insurance company ultimately filed its own declaratory judgment¹ action seeking to establish that there was no insurance coverage available because the Fraternity’s policy specifically provides that “no duty to defend nor any insurance coverage afforded by this policy, shall apply to any claim arising out of or in any way resulting from any ‘violation’ of ‘fraternity alcohol policy’.”  The Fraternity’s Alcohol Policy specifically prohibited the consumption of alcohol in violation of State Law, either on chapter property “or at any environment or function given in the name of, or for the benefit of, Lambda Chi Alpha.”

On February 13, 2007, the court found that Travis Star’s own conduct, consuming alcohol illegally, violated Lambda Chi Alpha’s alcohol policy and therefore the insurance company was not obligated to defend the Chapter.  The court noted that requiring insurance coverage in such a case would “result in the subsidization of underage drinking, and would thus directly counter the rationale for adding the exclusion in the first place.”

While this case grows out of the tragic consequences that may come from illegal and irresponsible consumption of alcohol, the decision in this case emphasizes the potential damage that can be done to a Chapter from such activity since, depending on the language of the applicable insurance policy, coverage may not be available to protect the Chapter from the financial consequences of such tragedies.  The court did recognize in a concluding footnote that “the exclusion is expansive in scope, but in light of the fact that the parties bargained for this provision, the court cannot save the Chapter from the bad bargain.”

 ¹ Liberty Corporate Capital, Ltd., v. Nu Zeta Chapter of Lambda Chi Alpha Fraternity, et al., United States District Court, Middle District of Georgia, Athens Division, Case No. 3:05-CV-115(CAR).